In Mann v Paterson Constructions Pty Ltd, the owners of a property had repudiated a domestic building contract when the building works had been partially executed. Most building contracts are divisible, so that agreed payments are to be made by the owner at the completion of each stage of construction. In such a situation, if payment has not been made for a completed stage, the High Court unanimously held that the builder's claim in relation to the completed stage of the contract rests only in contract. In relation to a partially completed stage of the contract, a majority of the Court held that a builder would not be entitled to a quantum meruit claim for work done where the builder had accrued a right to payment under the contract. However, the majority did find that a builder could commence a quantum meruit claim where the builder has not accrued a right to payment under the contract, for example, where payment is not due until the completion of the whole of the works (at [62]-[64] (per Gageler J); at [176] (per Nettle, Gordon and Edelman JJ); at [21]-[22] and [30]-[32] (per Kiefel CJ, Bell and Keane JJ).
The existence of the contract meant, however, that the total amount recoverable on a quantum meruit claim, where a contract is terminated for repudiation, is limited to the contract price for the particular stage of the works.(at [101]-[102] per Gageler J) and [205] (per Nettle, Gordon and Edelman JJ). Importantly, it was noted that the contract price is relevant and that a restitutionary claim in excess of the contractual price would be difficult to uphold. On this issue, Nettle, Gordon and Edelman JJ stated the following at [215]:
It is, therefore, appropriate to recognise that, where an entire obligation (or entire divisible stage of a contract) for work and labour (such as, for example, an entire obligation under or an obligation under a divisible stage of a domestic building contract) is terminated by the plaintiff upon the plaintiff’s acceptance of the defendant’s repudiation of the contract, the amount of restitution recoverable as upon a quantum meruit by the plaintiff for work performed as part of the entire obligation (or as part of the entire divisible stage of the contract) should prima facie not exceed a fair value calculated in accordance with the contract price or appropriate part of the contract price.
Relevantly, Gageler J put the this issue in the following way at [102]:
The common law rule should accordingly be that the amount recoverable on a non-contractual quantum meruit as remuneration for services rendered in performance of a contract prior to its termination by acceptance of a repudiation cannot exceed that portion of the contract price as is attributable to those services. Issues concerning the identification and appropriate method of apportionment of the contract price are best left to be addressed on a case by case basis if and when they arise.
It should be noted that Nettle, Gordon and Edelman JJ (at [216]-[217]) observed that there maybe circumstances where it is appropriate that a builder recover an amount greater than the contract price, although this would be only in exceptional cases. However, this observation was not embraced by the other judges: see [21]-[22] (per Kiefel CJ, Bell and Keane JJ) and[101]-[102] (per Gageler J)).
The decision in Mann is particularly apt in the light of section 94 of the Home Building Act 1989. That section relevantly provides:
(1) If a contract of insurance required by section 92 is not in force, in the name of the person who contracted to do the work, in relation to any residential building work done under a contract (the "uninsured work" ), the contractor who did the work--
(a) is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and
(b) is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).
(1A) Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
A reading of section 94(1A) makes it clear that a person's entitlement to recover money in the circumstances set out in section 94(1) is dependent upon demonstrating that it is just and equitable to recover. That leaves open the possibility that the recovery of money on a quantum meruit basis may be more than the contract price. If so, this should not be the proper interpretation of the section and, the better interpretation is that, prima facie, the amount recoverable should not exceed a fair value and that the claim should not be one entitling the claimant to rewrite contractual entitlements so as to strike a better deal.
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